Soyoil's credentials as an environmentally-viable source of biodiesel will foster a reversal of cutbacks at US biofuel plants, and is boosting demand among Argentine refiners too.

A finding by American environmental regulators two weeks ago that soyoil-based biodiesel is, even taking its manufacture into account, half as polluting as conventional diesel has "brightened" the outlook for the sector, the US Department of Agriculture has said.

By providing "added certainty" of a US market for a biofuel whose prospects were dented by the loss of a $1-a-gallon tax credit, the Environmental Protection Agency ruling has heralded a revival in manufacturing volumes.

"Production capacity at most US biodiesel plants has been idled since January 1," when the credit expired, the USDA added.

"However, this production shortfall could still be made up by next fall."

Argentine taxes 

The use of soyoil for making biodiesel is increasing in Argentina too, meaning that growth in exports of the raw vegetable oil will in 2009-10 lag behind the 12.3% jump in shipments forecast for soymeal, the other main product of soybean processing.

"Argentine exports of soybean oil may be muted by expanding domestic use," the USDA said.

Fresh regulations expanding domestic biofuel use "could create a demand for up to 700,000 tonnes" of soyoil a year, equivalent to about 44% of Argentina's current use.

Meanwhile, a tax regime which places a levy of 32% on exports of soyoil, but only 17.5% on those of of soy-based biofuel, meant that biodiesel shipments had become a "very profitable alternative" to selling the raw vegetable oil.